The underwriting cycle is essential to the insurance industry, since each stage of the cycle brings with it different opportunities for insurance companies. During the boom or growth cycle, firms can benefit from increased competition where premiums are low, leading to greater business and higher profits. Companies can get more customers, invest more in insurance products and expand their operations. In this phase, losses are relatively low and income is relatively high.

During the bust or recessionary cycle, companies have to contend with declining competition, higher premiums and more costly claims. During this phase, more companies drop out of the market, competition is reduced, and premiums rise. As a result, smaller companies can sometimes no longer afford to stay in the market, leading to eventual financial insolvency as losses exceed income.

The key to successful underwriting is to be able to accurately detect the upcoming changes in the market conditions and capitalize on them. A typical insurance company would use various methods like catastrophe models and pricing optimization tools to identify changes in the market and adjust their strategy accordingly. By understanding the current and future trends in the underwriting cycle, companies can take advantage of opportunities to increase business and profits.

Overall, the underwriting cycle is a significant part of the insurance industry. Companies must understand the dynamics of the cycle and take advantage of opportunities as they arise. By being able to recognize signs that the cycle is changing, they can adapt their strategies to what will provide the most success. With the right strategies, companies are better equipped to manage their changing environment and stay afloat amidst the ever-changing underwriting cycle.